Management Compensation Plans

General Plan Description

In April 2009, the Company and our stockholders approved a global incentive plan which replaces the Company’s 2004 Stock Incentive Plan (“2004 SIP”). The 2009 Global Incentive Plan (“2009 GIP”) enables the compensation committee of the Board of Directors to award incentive and nonqualified stock options, stock appreciation rights, shares of Series A common stock, restricted stock, restricted stock units (“RSUs”) and incentive bonuses (which may be paid in cash or stock or a combination thereof), any of which may be performance-based, with vesting and other award provisions that provide effective incentive to Company employees (including officers), non-management directors and other service providers. Under the 2009 GIP, the Company no longer can grant RSUs with the right to participate in dividends or dividend equivalents.

The maximum number of shares that may be issued under the 2009 GIP is equal to 5,350,000 shares plus (a) any shares of Series A common stock that remain available for issuance under the 2004 Stock Incentive Plan (“SIP”) (not including any shares of Series A common stock that are subject to outstanding awards under the 2004 SIP or any shares of Series A common stock that were issued pursuant to awards under the 2004 SIP) and (b) any awards under the 2004 stock incentive plan that remain outstanding that cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the award to the extent that such award is exercised for or settled in vested and non-forfeitable shares).

Total shares available for awards and total shares subject to outstanding awards are as follows:

_____________________


⁽¹⁾	At the Company's discretion under the 2004 SIP, the Company had the right to award dividend equivalents on RSU grants which are earned in accordance with the Company's common stock dividend policy and are reinvested in additional RSUs. Dividend equivalents on these RSUs are forfeited if vesting conditions are not met.

Upon the termination of a participant’s employment with the Company by reason of death or disability or by the Company without cause (as defined in the respective award agreements), an award in amount equal to (i) the value of the award granted multiplied by (ii) a fraction, (x) the numerator of which is the number of full months between grant date and the date of such termination, and (y) the denominator of which is the term of the award, such product to be rounded down to the nearest whole number, and reduced by (iii) the value of any award that previously vested, shall immediately vest and become payable to the Participant. Upon the termination of a Participant’s employment with the Company for any other reason, any unvested portion of the award shall be forfeited and cancelled without consideration.

There was $25 million and $19 million of tax benefit realized from stock option exercises and vesting of RSUs during the years ended December 31, 2011 and 2010, respectively. During the year ended December 31, 2011, the Company reversed $9 million of the $19 million tax benefit that was realized during the year ended December, 2010.

Stock Options

The Company has a stock-based compensation plan that makes awards of stock options to the Company’s executives and certain employees. It is the Company’s policy to grant options with an exercise price equal to the average of the high and low price of the Company’s Series A common stock on the grant date. The options issued have a term ranging from seven to ten years and vest on a graded basis over four years. The estimated value of the Company’s stock-based awards less expected forfeitures is recognized over the awards’ respective vesting period on a straight-line basis.

Generally, vested stock options are exercised through a broker-assisted cashless exercise program. A broker-assisted cashless exercise is the simultaneous exercise of a stock option by an employee and a sale of the shares through a broker. Authorized shares of the Company’s Series A common stock are used to settle stock options.

Beginning in October 2010, the Company started granting awards of stock options to certain executive officers of the Company that require a holding period of one year subsequent to exercising a stock option award for net profit shares (as defined below) acquired upon exercise. Net profit shares means the aggregate number of shares determined by the Company’s human resources department representing the total number of shares remaining after taking into account the following costs related to exercise: (i) the aggregate option price with respect to the exercise; (ii) the amount of all applicable taxes with respect to the exercise, assuming the participant’s maximum applicable federal, state and local tax rates (and applicable employment taxes); and (iii) any transaction costs.

The fair value of each option granted is estimated on the grant date using the Black-Scholes option pricing method. The weighted average assumptions used in the model are as follows:



	Year Ended December 31,
	2011		2010		2009
Risk-free interest rate	0.81	%	1.27	%	1.90	%
Estimated life in years	4.75		5.72		5.20
Dividend yield	0.60	%	0.59	%	0.96	%
Volatility	45.00	%	51.75	%	54.30	%

The computation of the expected volatility assumption used in the Black-Scholes calculations for new grants is based on the Company’s historical volatilities. When establishing the expected life assumptions, the Company reviews annual historical employee exercise behavior of option grants with similar vesting periods.

The summary of changes in stock options outstanding is as follows:



	Number of Options		Weighted- Average Exercise Price	Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
	(In millions)		(In $)	(In years)	(In $ millions)
As of December 31, 2010	5.3		19.27	4.2	115
Granted	0.2		32.51
Exercised	(0.9	)	23.90
Forfeited	—		—
Expired	—		—
As of December 31, 2011	4.6		18.94	3.6	118
Options exercisable at end of year	4.4		18.37	3.5	114

The weighted-average grant-date fair values of stock options granted is as follows:



	Year Ended December 31,
	2011		2010		2009
Total	$	11.38	$	14.76	$	7.46

The total intrinsic value of options exercised and cash received from stock option exercises is as follows:



	Year Ended December 31,
	2011	2010	2009
	(In $ millions)
Intrinsic value of stock options	20	13	9
Cash received from stock option exercises	20	14	14

As of December 31, 2011, the Company had $4 million of total unrecognized compensation expense related to stock options, excluding actual forfeitures, which is expected to be recognized over the weighted-average period of 3.2 years.

Restricted Stock Units

The Company’s RSUs are net settled by withholding shares of the Company’s Series A common stock to cover minimum statutory income taxes and remitting the remaining shares of the Company’s Series A common stock to an individual brokerage account. Authorized shares of the Company’s Series A common stock are used to settle RSUs.

Performance-based RSUs. The Company grants performance-based RSUs to the Company’s executive officers and certain employees once per year. The Company may also grant performance-based RSUs to certain new employees or to employees who assume positions of increasing responsibility at the time those events occur. The number of performance-based RSUs that ultimately vest is dependent on one or both of the following according to the terms of the specific award agreement: The achievement of a) internal profitability targets (performance condition) and b) market performance targets measured by the comparison of the Company’s stock performance versus a defined peer group (market condition).

The performance-based RSUs generally cliff-vest during the Company’s quarter-end September 30 black-out period three years from the date of grant. The ultimate number of shares of the Company’s Series A common stock issued will range from zero to stretch, with stretch defined individually under each award, net of shares used to cover minimum statutory personal income taxes withheld. The market condition is factored into the estimated fair value per unit and compensation expense for each award will be based on the probability of achieving internal profitability targets, as applicable, and recognized on a straight-line basis over the term of the respective grant, less estimated forfeitures. For performance-based RSUs granted without a performance condition, compensation expense is based on the fair value per unit recognized on a straight-line basis over the term of the grant, less estimated forfeitures. Upon the termination of participant’s employment by the Company without cause

prior to the vesting date, the participant is eligible for a prorated number of performance-based RSUs based on a formula as outlined in each agreement.

A summary of changes in nonvested performance-based RSUs outstanding is as follows:



	Number of Units		Weighted Average Fair Value
	(In thousands)		(In $)
As of December 31, 2010	1,175		30.67
Granted	266		40.81
Vested	(290	)	14.65
Cancelled	(24	)	21.30
Forfeited	(70	)	36.89
As of December 31, 2011	1,057		37.42

The fair value of shares vested for performance-based RSUs is as follows:



	Year Ended December 31,
	2011	2010	2009
	(In $ millions)
Total	14	8	2

Fair value for the Company’s performance-based RSUs was estimated at the grant date using a Monte Carlo simulation approach less the present value of the expected dividends not received during the performance period. Monte Carlo simulation was utilized to randomly generate future stock returns for the Company and each company in the defined peer group for each grant based on company-specific dividend yields, volatilities and stock return correlations. These returns were used to calculate future performance-based RSU vesting percentages and the simulated values of the vested performance-based RSUs were then discounted to present value using a risk-free rate, yielding the expected value of these performance-based RSUs.

The range of assumptions used in the Monte Carlo simulation approach is as follows:



	Year Ended December 31,
	2011		2010		2009
Risk-free interest rate	0.38	%	0.79	%	1.11	%
Dividend yield	0.00 - 4.37%		0.00 - 4.18%		0.00 - 4.64%
Volatility	25 - 90%		25 - 70%		25 - 75%

Time-based RSUs. The Company grants non-employee Directors time-based RSUs annually that generally vest one year after grant. The fair value of the time-based RSUs is equal to the closing price of the Company’s Series A common stock on the grant date less the present value of the expected dividends not received during the vesting period.

The Company also grants time-based RSUs to the Company’s executives and certain employees that vest ratably over intervals ranging from three to four years. The fair value of the time-based RSUs is equal to the average of the high and low price of the Company’s Series A common stock on the grant date less the present value of the expected dividends not received during the vesting period. Upon the termination of participant’s employment by the Company without cause prior to the vesting date, the participant is eligible for a prorated number of time-based RSUs based on a formula as outlined in each agreement.

A summary of changes in nonvested time-based RSUs outstanding is as follows:



	Employee Time-based RSUs			Director Time-Based RSUs
	Number of Units		Weighted Average Fair Value	Number of Units		Weighted Average Fair Value
	(In thousands)		(In $)	(In thousands)		(In $)
As of December 31, 2010	607		26.41	21		33.13
Granted	332		33.67	13		49.30
Vested	(213	)	27.78	(21	)	33.13
Forfeited	(44	)	27.27	—		—
As of December 31, 2011	682		30.37	13		49.30

As of December 31, 2011, there was $29 million of unrecognized compensation cost related to RSUs, excluding actual forfeitures, which is expected to be recognized over a weighted-average period of 1.8 years.

The fair value of shares vested for time-based RSUs is as follows:



	Year Ended December 31,
	2011	2010	2009
	(In $ millions)
Total	7	6	2

Beginning in October 2010, the Company started granting both time-based RSUs and performance-based RSUs to executive officers and certain employees of the Company that require a holding period of seven years from the grant date of the awards for 0% to 75% of the shares vested, depending on salary level, as specified in each individual agreement. The fair value of the RSUs with holding periods were discounted due to the lack of transferability of these RSUs during the holding period as follows:



	Year Ended December 31,
	2011	2010	2009
	(In percentages)
Holding period discount	30	30	N/A

The discount was determined using the weighted-average results as calculated under the Chaffe and Finnerty models.

Performance Units

In December 2008, the Company granted 200,000 performance units to be settled in cash to the Company’s CEO. The terms of the performance units are substantially similar to the performance-based RSUs granted in December 2008 and include a performance condition and a market condition. On October 14, 2011 the performance units vested and $10 million was paid in cash to the Company's CEO. As of December 31, 2011, there are not any remaining amounts to be paid.

The expense related to performance units is as follows:



	Year Ended December 31,
	2011	2010	2009
	(In $ millions)
Total	3	5	2

Deferred Compensation

In April 2007, certain participants in the Company’s 2004 deferred compensation plan elected to participate in a revised program, which includes both cash awards and restricted stock units (see Restricted Stock Units above). Based on participation in the revised program, the Company expensed $0 million, $9 million and $10 million during the years ended December 31, 2011, 2010 and 2009, respectively, related to the revised program and made payments of $1 million to participants who left the Company and did not make any payments to active employees during the year ended December 31, 2011.

Cash awards

In December 2008, the Company granted time-vesting cash awards to the Company’s executive officers and certain other key employees. On October 14, 2011 the final tranche of these cash awards vested. As of December 31, 2011, there are not any remaining amounts to be paid. The activity related to the time-vesting cash awards is as follows:



	Year Ended December 31,
	2011	2010	2009
	(In $ millions)
Expense	4	7	7
Payments to active employees	6	5	6
Payments to terminated employees	—	1	1

As of December 31, 2011

Shares Available for
Awards

Shares Subject to
Outstanding Awards